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Applying for Credit Card in Canada

Applying for Credit Card in Canada

There’s a first time for everything, including applying for a credit card. 

And even if it’s not your first time, the application process can be overwhelming nonetheless. Credit cards make payment convenient, and they provide you with a certain amount of fraud protection. Additionally, credit cards offer the fastest way for you to build your credit history. When you apply for a car loan or a home loan, having a good credit history can mean the difference between acceptance and rejection – and save you money in interest charges.


Applying for a credit card is fairly straightforward, but there are still some things you need to know. As you apply for your Canadian credit card, here are some of the things you will need:

  • Full Legal Name
  • Current & Previous Address
  • Identification Number
  • Employment Details
  • Income Information


Understanding Credit Scores in Canada

You are permitted to see copies of your credit reports and scores without penalty by contacting Equifax or TransUnion in writing and requesting your credit score be delivered to you by snail mail. Other methods, such as “free online credit score” agencies, will also reveal your credit score, but may penalize you by lowering your credit score if numerous credit score requests are made in a limited period of time.


Whether or not you get a credit card in Canada depends on your credit history.

Your personal credit score is reported by two credit bureaus:

  •  Equifax
  •  TransUnion

Credit numbers range from 300 to 900 with higher numbers indicating a more favourable credit score. This allows you to get a larger credit limit when you apply for a credit card.


STEP 1 : Your Credit Needs/Wants

There are different types of credit users and each has a different spending pattern.


Revolvers

A revolver is a term in the credit card industry for a credit user who carries a balance month after month, paying it off over time. They’re revolvers because the balance “revolves” from one month into the next. Aside from purchase interest rates and balance transfer rates, here are some other important credit card features that revolvers should be particularly aware of:

  • Interest-free period – the period in which you can avoid paying interest if you pay the full balance by a specified due date each month
  • Late payment fees – the fee you pay if you miss a payment or pay later than your specified monthly due date
  • Annual fee – the fee you pay to use the credit card each year
  • Foreign transaction fees – the fee you pay for a transaction in a foreign country.

Transactors

A transactor is the credit industry term for someone who is the opposite of a revolver. If you are a transactor, you pay off your balance in full and on time every month. You avoid paying interest because you don’t carry a balance.


Credit Builders

A credit builder is a term for someone who is attempting to build or rebuild their credit. If you’re new to owning a credit card, have recently immigrated to Canada, have a poor credit score or you’ve experienced a bankruptcy, you are a credit builder.

A secured credit card is slightly different than a ‘regular’ card, in that it requires a deposit which then becomes the card’s credit limit. A secured cardholder’s progress in paying back their card charges is reported frequently to the credit bureaus, which in turn improves the cardholder’s credit score.

Other important card features for credit builders are:

  • Minimum/maximum deposit – the lowest and highest amounts that can be deposited for the card, which in turn determines the card’s credit limit
  • Interest-bearing investment – some banks put your deposit in an interest-bearing investment vehicle as you build credit
  • Annual fee
  • Purchase interest rate
  • Eventual option to upgrade to an unsecured card


STEP 2: Determine Your Credit Card

Eligibility

There’s no point in applying for a credit card that you won’t be eligible for. Instead of filling out a credit card application prematurely, get a sense of what level of credit cards you’re likely to be approved for by reviewing where you stand with the following criteria.

  • Credit Score
  • Income
  • Age and Residential Status


STEP 3: Compare Your Credit Card Options

Once you’ve figured out the kind of credit user you are and where your eligibility stands, it’s time to find the credit card that’s right for you. Don’t jump on applying for the first card you come across. Compare the different options in the card category that interests you, and pick the card that you’re not only likely to qualify for, but which will also include at least some of the features you want:

  • Low Interest

If you’re a revolver who wants to carry a balance from month to month without generating high levels of additional interest charges, then a low interest card is what you want.

  • Travel Rewards

If you love to travel, a travel rewards card can help you get to where you want to go for less money—or even for free. But different travel rewards cards offer different perks, even if they might seem similar on first glance.

  • Lifestyle Rewards

Travel isn’t your thing? No problem, there are plenty of rewards credit cards offering discounts on groceries, entertainment, dining and gas.

  • Cash Back

Cash is king, and for that reason many Canadians prefer pure cash back cards as opposed to rewards cards.

  • Credit Building

While bad credit will limit the type of credit cards available to you, it won’t shut you out of having a credit card completely. Even if you’re building or rebuilding credit from scratch, there are still some good Canadian cards out there for you.


Step 4: Apply Online

After you set your sights on a card that suits your credit score, income, financial needs, and lifestyle, it’s time to finally apply for it. Different card applications require different information, but the below guidelines should give you a general idea of what’s in store for you.


Try to get the following details in order before you apply online:

  • Basic personal information (name, current address and phone number)
  • One previous address
  • Current rent or mortgage payment
  • Current occupation and employer’s address
  • Your personal annual income
  • Your household income and spouse’s income (if applicable)
  • Social insurance number
  • Mother’s maiden name (provides an extra layer of security when dealing with the credit card company in the future)


STEP 5: Wait to Be Approved

If you fill out a credit card application online during business hours, it’s possible to be approved in minutes. Sometimes the credit issuer will need additional information from you, but they will usually notify you via email if a representative will be calling over the next few days. As for when you’re getting the card following approval, they might tell you that it takes 2 to 3 business days, but be prepared to wait 7 to 10.

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